================================================================================

                                  United States

                       Securities and Exchange Commission

                             Washington, D.C. 20549

                                    Form 10-Q

                                   ----------

               Quarterly Report Pursuant to Section 13 or 15(d) of
                       the Securities Exchange Act of 1934


For the quarterly period ended September 30, 1999    Commission file number 1-27


                                   Texaco Inc.
           (Exact name of the registrant as specified in its charter)


         Delaware                                            74-1383447
(State or other jurisdiction of                            (I.R.S. Employer
incorporation or organization)                             Identification No.)


        2000 Westchester Avenue
         White Plains, New York                                        10650
(Address of principal executive offices)                             (Zip Code)



        Registrant's telephone number, including area code (914) 253-4000

                                   ----------

     Texaco Inc. (1) has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and
(2) has been subject to such filing requirements for the past 90 days.

     As of October 29, 1999, there were outstanding 553,059,992 shares of Texaco
Inc. Common Stock - par value $3.125.


================================================================================

<PAGE>

                         PART I - FINANCIAL INFORMATION

                                   TEXACO INC.
                        STATEMENT OF CONSOLIDATED INCOME
         FOR THE NINE AND THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
         ---------------------------------------------------------------
                     (Millions of dollars, except as noted)

<TABLE>
<CAPTION>
                                                                                             (Unaudited)
                                                                       -------------------------------------------------
                                                                        For the nine months         For the three months
                                                                        ended September 30,          ended September 30,
                                                                        -------------------          -------------------
                                                                         1999           1998          1999           1998
                                                                         ----           ----          ----           ----
<S>                                                                    <C>            <C>           <C>            <C>
         REVENUES
              Sales and services                                       $24,502        $23,132       $ 9,472        $ 7,481
              Equity in income of affiliates, interest,
                  asset sales and other                                    634            766           205            226
                                                                       -------        -------       -------        -------
                                                                        25,136         23,898         9,677          7,707
                                                                       -------        -------       -------        -------
         DEDUCTIONS
              Purchases and other costs                                 19,254         17,922         7,448          5,836
              Operating expenses                                         1,653          1,818           544            593
              Selling, general and administrative expenses                 871            862           270            290
              Exploratory expenses                                         282            324            72             93
              Depreciation, depletion and amortization                   1,082          1,172           356            409
              Interest expense                                             369            355           124            121
              Taxes other than income taxes                                211            328            63            103
              Minority interest                                             62             43            27             13
                                                                       -------        -------       -------        -------
                                                                        23,784         22,824         8,904          7,458
                                                                       -------        -------       -------        -------

         Income before income taxes and cumulative
              effect of accounting change                                1,352          1,074           773            249

         Provision for income taxes                                        493            258           386             34
                                                                       -------        -------       -------        -------
         Income before cumulative effect of
              accounting change                                            859            816           387            215

         Cumulative effect of accounting change                              -            (25)            -              -

         NET INCOME                                                    $   859        $   791       $   387        $   215
                                                                       =======        =======       =======        =======

         Preferred stock dividend requirements                         $    26        $    40       $     3        $    13
                                                                       -------        -------       -------        -------
         Net income available for common stock                         $   833        $   751       $   384        $   202
                                                                       =======        =======       =======        =======

         Per common share (dollars)
              Basic net income                                         $  1.56        $  1.42       $  0.71        $  0.38
              Diluted net income                                       $  1.56        $  1.42       $  0.71        $  0.38

              Cash dividends paid                                      $  1.35        $  1.35       $  0.45        $  0.45

         Average shares outstanding for computation
               of earnings per share (thousands)
              Basic                                                    532,534        529,433       543,671        525,836
              Diluted                                                  535,208        548,575       546,343        526,382




<FN>
                                     See  accompanying   notes  to  consolidated financial statements.
</FN>
</TABLE>


                                      - 1 -

<PAGE>

<TABLE>
<CAPTION>
                                   TEXACO INC.
                           CONSOLIDATED BALANCE SHEET
                 AS OF SEPTEMBER 30, 1999 AND DECEMBER 31, 1998
                 ----------------------------------------------
                              (Millions of dollars)
                                                                                       September 30,          December 31,
                                                                                           1999                   1998
                                                                                       -------------           -----------
                                                                                        (Unaudited)
                                                                                        -----------
<S>                                                                                          <C>                    <C>
ASSETS
   Current Assets
      Cash and cash equivalents                                                              $   193                $   249
      Short-term investments - at fair value                                                      26                     22
      Accounts and notes receivable, less allowance for doubtful
           accounts of  $27 million in 1999 and $28 million in 1998                            4,150                  3,955
      Inventories                                                                              1,380                  1,154
      Deferred income taxes and other current assets                                             224                    256
                                                                                             -------                -------
           Total current assets                                                                5,973                  5,636

   Investments and Advances                                                                    6,773                  7,184

   Properties, Plant and Equipment - at cost                                                  35,870                 35,494
   Less - accumulated depreciation, depletion and amortization                                20,875                 20,733
                                                                                             -------                -------
      Net properties, plant and equipment                                                     14,995                 14,761

   Deferred Charges                                                                            1,037                    989
                                                                                             -------                -------
           Total                                                                             $28,778                $28,570
                                                                                             =======                =======

LIABILITIES AND STOCKHOLDERS' EQUITY
   Current Liabilities
      Short-term debt                                                                        $   665                $   939
      Accounts payable and accrued liabilities
           Trade liabilities                                                                   2,643                  2,302
           Accrued liabilities                                                                 1,003                  1,368
      Estimated income and other taxes                                                           883                    655
                                                                                             -------                -------
           Total current liabilities                                                           5,194                  5,264

   Long-Term Debt and Capital Lease Obligations                                                6,626                  6,352
   Deferred Income Taxes                                                                       1,556                  1,644
   Employee Retirement Benefits                                                                1,251                  1,248
   Deferred Credits and Other Noncurrent Liabilities                                           1,480                  1,550
   Minority Interest in Subsidiary Companies                                                     711                    679
                                                                                             -------                -------
           Total                                                                              16,818                 16,737
   Stockholders' Equity
      Market Auction Preferred Shares                                                            300                    300
      ESOP Convertible Preferred Stock                                                             -                    428
      Unearned employee compensation and benefit plan trust                                     (332)                 (334)
      Common stock (authorized: 700,000,000 shares, $3.125 par value;
           567,576,504 shares issued in 1999; 567,606,290 shares issued in 1998)               1,774                  1,774
      Paid-in capital in excess of par value                                                   1,304                  1,640
      Retained earnings                                                                        9,677                  9,561
      Other accumulated nonowner changes in equity
         Currency translation adjustment                                                         (97)                 (107)
         Minimum pension liability adjustment                                                    (24)                  (24)
         Unrealized net gain on investments                                                        3                     30
                                                                                             -------                -------
           Total other accumulated nonowner changes in equity                                   (118)                 (101)
                                                                                             -------                -------
                                                                                              12,605                 13,268
      Less - Common stock held in treasury, at cost                                              645                  1,435
                                                                                             -------                -------
         Total stockholders' equity                                                           11,960                 11,833
                                                                                             -------                -------
           Total                                                                             $28,778                $28,570
                                                                                             =======                =======
<FN>
                                        See  accompanying  notes to consolidated financial statements.
</FN>
</TABLE>

                                       -2-
<PAGE>

<TABLE>
<CAPTION>

                                   TEXACO INC.
                 CONDENSED STATEMENT OF CONSOLIDATED CASH FLOWS
              FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
              -----------------------------------------------------
                              (Millions of dollars)
                                                                                                   (Unaudited)
                                                                                               -------------------
                                                                                               For the nine months
                                                                                               ended September 30,
                                                                                               -------------------
                                                                                              1999               1998
                                                                                              ----               ----
<S>                                                                                         <C>                <C>
OPERATING ACTIVITIES
   Net income                                                                               $   859            $   791
   Reconciliation to net cash provided by (used in)
      operating activities
         Cumulative effect of accounting change                                                   -                 25
         Depreciation, depletion and amortization                                             1,082              1,172
         Deferred income taxes                                                                    3                (36)
         Exploratory expenses                                                                   282                324
         Minority interest in net income                                                         62                 43
         Dividends from affiliates, greater (less) than
            equity in income                                                                     25                (30)
         Gains on asset sales                                                                   (70)               (61)
         Changes in working capital                                                            (290)              (164)
         Other - net                                                                            (66)                14
                                                                                             ------             ------
            Net cash provided by operating activities                                         1,887              2,078

INVESTING ACTIVITIES
   Capital and exploratory expenditures                                                      (1,729)            (2,226)
   Proceeds from asset sales                                                                    306                130
   Purchases of investment instruments                                                         (406)              (809)
   Sales/maturities of investment instruments                                                   685                806
   Collection of note/formation payments from U.S. affiliate                                    101                612
   Other - net                                                                                  (23)                25
                                                                                             ------             ------
            Net cash used in investing activities                                            (1,066)            (1,462)
FINANCING ACTIVITIES
   Borrowings having original terms in excess
      of three months
         Proceeds                                                                             2,086              1,028
         Repayments                                                                            (763)              (493)
   Net increase (decrease) in other borrowings                                               (1,395)               166
   Purchases of common stock                                                                      -               (579)
   Dividends paid to the company's stockholders
      Common                                                                                   (719)              (716)
      Preferred                                                                                 (26)               (31)
   Dividends paid to minority stockholders                                                      (31)               (45)
                                                                                             ------             ------
            Net cash used in financing activities                                              (848)              (670)

CASH AND CASH EQUIVALENTS
   Effect of exchange rate changes                                                              (29)                (7)
                                                                                             ------             ------
   Decrease during period                                                                       (56)               (61)
   Beginning of year                                                                            249                311
                                                                                             ------             ------
   End of period                                                                            $   193            $   250
                                                                                            =======            =======

<FN>
                                    See  accompanying   notes  to  consolidated financial statements.
</FN>
</TABLE>



                                       -3-
<PAGE>

<TABLE>
<CAPTION>

                                   TEXACO INC.
         CONDENSED STATEMENT OF CONSOLIDATED NONOWNER CHANGES IN EQUITY
          FOR THE NINE AND THRE MONTHS ENDED SEPTEMBER 30,1999 AND 1998
          -------------------------------------------------------------
                              (Millions of dollars)
                                                                                    (Unaudited)
                                                                 ------------------------------------------------
                                                                 For the nine months         For the three months
                                                                 ended September 30,          ended September 30,
                                                                 -------------------          -------------------
                                                                 1999            1998         1999           1998
                                                                 ----            ----         ----           ----

<S>                                                            <C>             <C>          <C>            <C>
   Net income                                                  $   859         $   791      $   387        $    215
   Other nonowner changes in equity (net of tax)
      Currency translation adjustment                               10              (2)          10               -
      Minimum pension liability adjustment                           -               2            -               -
      Unrealized net gain (loss) on investments                    (27)              2           (5)             (5)
                                                               -------         -------      -------        --------
                                                                   (17)              2            5              (5)
                                                               -------         -------      -------        --------
   Total nonowner changes in equity                            $   842         $   793      $   392        $    210
                                                               =======         =======      =======        ========
</TABLE>






                                   TEXACO INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 1. Segment Information
---------------------------

<TABLE>
<CAPTION>
                                                                  For the nine months ended September 30,
                                           -------------------------------------------------------------------------------
                                                               1999                                   1998
                                           --------------------------------------    -------------------------------------
                                             Sales and Services                        Sales and Services
                                             ------------------         After          ------------------        After
                                                    Inter-               Tax                 Inter-               Tax
                                           Outside  Segment   Total Profit (Loss)    Outside  Segment   Total Profit (Loss)
                                           -------  -------   ----- -------------    -------  -------   ----- -------------
                                                                        (Millions of dollars)
                                                                             (Unaudited)
<S>                                       <C>       <C>      <C>       <C>         <C>       <C>      <C>        <C>
Exploration and production
     United States                        $ 1,434   $1,100   $ 2,534   $  444      $ 1,330   $1,293   $ 2,623    $  301
     International                          1,770      605     2,375      189        1,518      467     1,985       166
Refining, marketing and distribution
     United States                          2,461       12     2,473      204        1,982      100     2,082       233
     International                         15,761      137    15,898      377       14,700       74    14,774       414
                                            3,068       82     3,150       13        3,555       68     3,623        (9)
Global gas and power                      -------   ------   -------   ------      -------   ------   -------    ------
     Segment totals                       $24,494   $1,936    26,430    1,227      $23,085   $2,002    25,087     1,105
                                          =======   ======                         =======   ======
Other business units                                              27       (3)                             73        (1)
Corporate/Non-operating                                            5     (365)                              3      (288)
Intersegment eliminations                                     (1,960)      --                          (2,031)       --
     Consolidated, before                                    -------   ------                         -------    ------
     cumulative effect of
     accounting change                                       $24,502   $  859                         $23,132    $  816
                                                             =======   ======                         =======    ======

</TABLE>




                                      - 4 -
<PAGE>

<TABLE>
<CAPTION>

                                                                 For the three months ended September 30,
                                           -------------------------------------------------------------------------------
                                                               1999                                   1998
                                           --------------------------------------    -------------------------------------
                                             Sales and Services                        Sales and Services
                                             ------------------         After          ------------------        After
                                                    Inter-               Tax                 Inter-               Tax
                                           Outside  Segment   Total Profit (Loss)    Outside  Segment   Total Profit (Loss)
                                           -------  -------   ----- -------------    -------  -------   ----- -------------
                                                                        (Millions of dollars)
                                                                             (Unaudited)
<S>                                        <C>        <C>     <C>        <C>        <C>        <C>     <C>         <C>
Exploration and production
     United States                         $  608     $434    $ 1,042    $258       $  404     $388    $  792      $ 93
     International                            748      307      1,055     129          491      170       661        53
Refining, marketing and distribution
     United States                          1,021        5      1,026     118          624       22       646       124
     International                          5,905       63      5,968       6        4,817       48     4,865        38
Global gas and power                        1,189       35      1,224       6        1,125       24     1,149        (8)
                                           ------     ----     ------     ---       ------     ----     -----       ---
     Segment totals                        $9,471     $844     10,315     517       $7,461     $652     8,113       300
                                           ======     ====                          ======     ====
Other business units                                                7      (1)                             29        (1)
Corporate/Non-operating                                             1    (129)                              1       (84)
Intersegment eliminations                                       (851)      --                            (662)       --
                                                              -------    ----                          ------      ----
     Consolidated                                             $ 9,472    $387                          $7,481      $215
                                                              =======    ====                          ======      ====

</TABLE>

<TABLE>
<CAPTION>
                                                                                       Assets as of
                                                                        ----------------------------------------------
                                                                        September 30,                     December 31,
                                                                            1999                              1998
                                                                        -------------                     ------------
                                                                         (Unaudited)
                                                                                    (Millions of dollars)
<S>                                                                        <C>                              <C>
Exploration and production
     United States                                                         $ 8,871                          $ 8,699
     International                                                           4,600                            4,349
Refining, marketing and distribution
     United States                                                           3,780                            4,095
     International                                                           8,829                            8,210
Global gas and power                                                         1,314                            1,088
                                                                           -------                          -------
     Segment totals                                                         27,394                           26,441
Other business units                                                           388                              384
Corporate/Non-operating                                                      1,264                            1,945
Intersegment eliminations                                                     (268)                            (200)
                                                                           -------                          -------
     Consolidated                                                          $28,778                          $28,570
                                                                           =======                          =======

</TABLE>


During the third  quarter of 1999,  responsibility  for the global gas marketing
segment and our  cogeneration,  gasification,  hydrocarbons-to-liquids  and fuel
cell technology units was combined under a single senior executive, creating the
Global Gas and Power  segment.  Prior period  information  has been  restated to
reflect this change.




                                      - 5 -
<PAGE>


Note 2. Inventories
-------------------

The inventory accounts of Texaco are presented below (in millions of dollars):

<TABLE>
<CAPTION>

                                                                                                 As of
                                                                               --------------------------------------
                                                                               September 30,              December 31,
                                                                                   1999                       1998
                                                                               -------------              ------------
                                                                                (Unaudited)

<S>                                                                               <C>                       <C>
     Crude oil                                                                    $  260                    $  116
     Petroleum products and petrochemicals                                           887                       799
     Other merchandise                                                                46                        40
     Materials and supplies                                                          187                       199
                                                                                  ------                    ------
          Total                                                                   $1,380                    $1,154
                                                                                  ======                    ======
</TABLE>


Note 3. Redemption of Series B and Series F ESOP Convertible Preferred Stock
----------------------------------------------------------------------------

On June 30, 1999,  after having called the Series B ESOP  Convertible  Preferred
Stock for  redemption,  each share of Series B was converted into 25.736 shares,
or 15.1 million shares in total, of Common Stock of Texaco Inc.

On  February  16,  1999,  after  having  called  the  Series F ESOP  Convertible
Preferred  Stock for  redemption,  each share of Series F was converted  into 20
shares, or 1.1 million shares in total, of Common Stock of Texaco Inc.

These noncash financing activities for the first nine months of 1999 resulted in
reductions of $391 million in preferred  stock  outstanding  and $308 million in
paid-in  capital.  This was offset by a $699  million  reduction  in the cost of
shares held in treasury.

Note 4. Other Financial Information, Commitments and Contingencies
------------------------------------------------------------------

Information  relative to  commitments  and  contingent  liabilities of Texaco is
presented in Note 16, pages 67 and 68, of our 1998 Annual  Report and in Note 4,
pages 5 and 6, of our first quarter, 1999 Form 10-Q.

It is impossible for us to ascertain the ultimate legal and financial  liability
with respect to  contingencies  and commitments.  However,  we do not anticipate
that the  aggregate  amount of such  liability in excess of accrued  liabilities
will be materially important in relation to our consolidated  financial position
or results of operations.

Note 5. Investments in Significant Equity Affiliates
----------------------------------------------------

U.S. Downstream Alliances

Summarized unaudited financial  information for Equilon,  formed January 1, 1998
and jointly owned 44% by Texaco and 56% by Shell Oil Company, is presented below
on a 100% Equilon basis (in millions of dollars):

<TABLE>
<CAPTION>
                                                                       For the nine months       For the three months
                                                                       ended September 30,        ended September 30,
                                                                    -----------------------      ----------------------
                                                                      1999            1998           1999         1998
                                                                      ----            ----           ----         ----
<S>                                                                 <C>             <C>             <C>          <C>
          Gross revenues                                            $19,955         $18,195         $8,501       $6,100
          Income before income taxes                                $   378         $   542         $  330       $  232

</TABLE>




                                      - 6 -

Summarized unaudited financial  information for Motiva,  formed July 1, 1998 and
jointly  owned  32.5%  each by Texaco  and Saudi  Refining,  Inc.  (a  corporate
affiliate of Saudi Aramco) and 35% by Shell Oil Company, is presented below on a
100% Motiva basis (in millions of dollars):

<TABLE>
<CAPTION>
                                                                                          For the three
                                                        For the nine                months ended September 30,
                                                        months ended                --------------------------
                                                     September 30, 1999            1999                    1998
                                                     ------------------            ----                    ----
<S>                                                          <C>                   <C>                    <C>
         Gross revenues                                      $8,432                $3,416                 $2,877
         Income before income taxes                          $   65                $   45                 $   59
</TABLE>

We account for our  interests in Equilon and Motiva  using the equity  method of
accounting.  Under this method,  we record our share of  Equilon's  and Motiva's
results of operations  on a one-line  basis to Equity in Income of Affiliates in
the Statement of Consolidated Income. Additionally, since Equilon and Motiva are
limited liability  companies,  we record the provision and related liability for
income taxes applicable to our share of Equilon's and Motiva's pre-tax income in
our consolidated financial statements.

Caltex Group of Companies

Summarized  unaudited  financial  information for the Caltex Group of Companies,
owned 50% by Texaco and 50% by Chevron Corporation, is presented below on a 100%
Caltex Group basis (in millions of dollars):

<TABLE>
<CAPTION>
                                                                       For the nine months       For the three months
                                                                       ended September 30,        ended September 30,
                                                                       -------------------        -------------------
                                                                      1999            1998       1999            1998
                                                                      ----            ----       ----            ----
<S>                                                                 <C>             <C>         <C>             <C>
         Gross revenues                                             $15,617         $12,407     $6,951          $3,852
         Income before income taxes and cumulative
              effect of accounting change                           $   666         $   606     $  148          $   16
         Income (loss) before cumulative effect
              of  accounting change                                 $   378         $   369     $   35          $  (58)
         Net income (loss)                                          $   378         $   319     $   35          $  (58)
</TABLE>

Effective January 1, 1998, Caltex adopted a new accounting  standard,  Statement
of Position 98-5, "Reporting on the Costs of Start-Up Activities," issued by the
American Institute of Certified Public Accountants. This resulted in a change in
accounting  for  start-up  costs at Caltex'  Thailand  refinery.  Caltex'  first
quarter 1998 results  included a $50 million charge (no tax benefit)  associated
with this accounting change.

On  September  22,  1999,  Caltex  sold 97.2% of its 50% equity  interest  (70.6
million  shares) in Koa Oil Co. Ltd. to Nippon  Mitsubishi  Oil  Corporation  in
response to their public  tender offer.  In late October  1999,  Caltex sold its
remaining  1,977,000  shares  of  Koa to  Mitsubishi  Corporation  in a  private
transaction. Caltex recorded a loss of $63 million in the third quarter of 1999,
resulting from the U.S. tax consequences of the sale.

                              * * * * * * * * * * *

We have  consistently  applied the accounting  policies we used in preparing the
financial  statements  we issued  in our 1998  Annual  Report  to our  unaudited
financial  statements  for the nine and three month periods ended  September 30,
1999 and 1998.  In our opinion,  we have made all  adjustments  and  disclosures
necessary to present  fairly our results of operations  for such periods.  These
adjustments include normal recurring adjustments.  The information is subject to
year-end  audit by  independent  public  accountants.  We make no  forecasts  or
representations with respect to the level of net income for the year 1999.

                              * * * * * * * * * * *


                                      - 7 -
<PAGE>


                      SUPPLEMENTAL MARKET RISK DISCLOSURES

We are exposed to the following types of market risks:
o  The price of crude oil, natural gas and petroleum products
o  The value of foreign currencies in relation to the U.S. dollar
o  Interest rates

We use derivative financial instruments,  such as futures, forwards, options and
swaps, in managing these risks.  There were no material changes during the first
nine months of 1999 in our exposure to losses from  possible  future  changes in
the price of crude oil,  natural gas and  petroleum  products,  or from possible
future changes in the value of foreign currencies in relation to the U. S.
dollar.

The Liquidity and Capital  Resources section of the MD&A appearing on page 15 of
this Form 10-Q describes  financing and related hedging  transactions we entered
into  during the first nine months of 1999.  As a result of those  transactions,
our variable rate debt,  before the effects of interest  rate swaps,  now totals
$2.1  billion,  as compared  with $2.7  billion at year-end  1998.  The notional
amount of  interest  rate swaps  increased  $850  million  and now  totals  $1.6
billion.  Based on our present  interest rate exposure on variable rate debt and
interest rate swaps,  a  hypothetical  increase or decrease in interest rates of
200  basis  points  would  not  materially  affect  our  consolidated  financial
position, net income or cash flows.




                                      - 8 -
<PAGE>


                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                  ---------------------------------------------

RESULTS OF OPERATIONS
---------------------

The following  table provides a summary of Texaco's net income and income before
special items for the third quarter and first nine months of 1999 and 1998:

<TABLE>
<CAPTION>

                                                                         For the nine months          For the three months
                                                                         ended September 30,           ended September 30,
                                                                         -------------------           -------------------
                                                                         1999           1998          1999           1998
                                                                         ----           ----          ----           ----
                                                                          (Millions of dollars, except per share amounts)
                                                                                            (Unaudited)
<S>                                                                     <C>             <C>           <C>            <C>
                 Income before special items                            $ 844           $ 802         $ 453          $ 208
                           Per share                                    $1.53           $1.44         $0.83          $0.37
                 Net income                                             $ 859           $ 791         $ 387          $ 215
                           Per share                                    $1.56           $1.42         $0.71          $0.38
</TABLE>

Boosted by  significantly  higher  crude oil and natural  gas prices,  our third
quarter results improved  dramatically  from the first half of the year to their
highest  quarterly level since 1997.  Cutbacks in OPEC and non-OPEC  production,
plus improving  global  economies  pushed  benchmark crude oil prices over $20 a
barrel.  But, prices remain volatile.  Operationally,  we had strong  production
during  September  in the North Sea,  led by record  production  in the  Captain
field.  In addition,  we are benefiting  significantly  from synergy capture and
expense  reductions  as our $650 million  global target will be realized by year
end, a full year ahead of schedule.  In the downstream,  our refineries ran well
and sales volumes  increased.  However,  these  businesses,  already burdened by
generally low refining margins,  were further hampered by the higher crude costs
which could not be fully recovered in product prices.

Looking ahead, our recent  acquisition of a 45 percent interest in the Malampaya
Deep Water Natural Gas Project in the  Philippines  exemplifies  our strategy of
pursuing  projects that will provide for long-term  growth and strong  near-term
earnings and cash flow. We also  continue to execute our  long-term  strategy of
reducing  refining  exposure  through  the  completion  of  Caltex'  sale of its
interest in Koa Oil Co. Ltd.  and the  anticipated  sales by Equilon of its Wood
River and El Dorado refineries.

Results for 1999 and 1998 are  summarized  in the table on the  following  page.
Details on special items are included in the segment analysis which follows this
table.  The  following  discussion  of  operating  earnings is  presented  on an
after-tax basis.





                                      - 9 -
<PAGE>

<TABLE>
<CAPTION>

                                                                         For the nine months          For the three months
                                                                         ended September 30,           ended September 30,
                                                                         -------------------           -------------------
                                                                         1999           1998          1999           1998
                                                                         ----           ----          ----           ----
                                                                                       (Millions of dollars)
                                                                                            (Unaudited)
<S>                                                                    <C>            <C>            <C>             <C>
Income before special items                                            $   844        $   802        $  453          $ 208
                                                                       -------        -------        ------           ----
Inventory valuation adjustments                                            152              -            14              -
Write-down of assets                                                       (76)             -             -              -
Tax issues                                                                  65             44             -             25
Gains (losses) on major asset sales                                        (59)            20           (80)             -
Reorganization, restructuring and employee separation costs                (67)           (50)            -            (18)
                                                                       -------        -------        ------           ----
Special items                                                               15             14           (66)             7
                                                                       -------        -------        ------           ----
Adoption of new accounting standard
   Cumulative effect of accounting change                                    -            (25)            -              -
                                                                       -------        -------        ------           ----
Net income                                                             $   859        $   791        $  387           $215
                                                                       =======        =======        ======           ====

</TABLE>


Effective  January 1, 1998,  our  affiliate,  Caltex,  adopted a new  accounting
standard,  Statement  of  Position  98-5,  "Reporting  on the Costs of  Start-Up
Activities,"  issued by the American Institute of Certified Public  Accountants.
This  resulted in a change in  accounting  for  start-up  costs at its  Thailand
refinery.  Our  first  quarter  1998  results  included  a  $25  million  charge
associated with this accounting change.


OPERATING RESULTS

     EXPLORATION AND PRODUCTION

        United States

Exploration  and  production  earnings in the U.S. for the third quarter of 1999
were $258  million,  as compared with $93 million for the third quarter of 1998.
For the first nine months of 1999 and 1998,  earnings were $444 million and $301
million.  Results for 1999 included a second quarter special gain of $21 million
from the sale of our interest in six California onshore and offshore fields, and
a special charge of $11 million for employee  separation  costs. See the section
entitled,  Reorganizations,   Restructurings  and  Employee  Severance  Programs
beginning on page 15 of this Form 10-Q for additional  information.  Results for
1999  also  included  a first  quarter  special  benefit  of $11  million  for a
production tax refund. Excluding these special items, results for the first nine
months of 1999 totaled $423 million.

U.S.  exploration and production  earnings for the third quarter and nine months
of 1999 were above last  year's  levels due to higher  crude oil and natural gas
prices and lower  expenses.  Prices  continued  to rise in the third  quarter as
production  cutbacks  by OPEC  and  several  non-OPEC  countries,  coupled  with
increasing demand in improving global  economies,  led to a decline in worldwide
inventory  levels.  Average  realized crude oil prices for the third quarter and
nine months of 1999 were $16.65 and $12.81 per barrel, 66 percent and 18 percent
higher  than the 1998  levels.  For the third  quarter  and nine months of 1999,
average  natural  gas prices  were $2.44 and $2.09 per MCF, 29 percent and three
percent above last year's periods.

Production  decreased  11 percent for both the third  quarter and nine months of
1999 due to natural field  declines and asset sales.  Capital  expenditures  for
developmental activities,  such as infill drilling,  recompletions and secondary
recovery  projects,  normally  undertaken to offset  production  declines within
mature fields were reduced as Texaco and its operating partners  concentrated on
maximizing capital efficiency.


                                     - 10 -
<PAGE>


Operating expenses declined significantly for the first nine months of 1999 as a
result  of  cost  savings  from  the  restructuring  of our  worldwide  upstream
organization.  Exploratory  expenses for the third quarter and first nine months
of 1999 were $12  million  and $104  million  before  tax,  $36  million and $91
million below the same periods of 1998.

         International

Exploration  and production  earnings  outside the U.S. for the third quarter of
1999 were $129  million,  as compared  with $53 million for the third quarter of
1998. For the first nine months of 1999 and 1998, earnings were $189 million and
$166 million.  Results for 1999 included a second  quarter  special charge of $2
million   for   employee   separation   costs.   See   the   section   entitled,
Reorganizations,  Restructurings  and Employee  Severance  Programs beginning on
page 15 of this Form 10-Q for  additional  information.  Excluding  the  special
charge, results for the first nine months of 1999 totaled $191 million.

International exploration and production operating results for the third quarter
and nine months of 1999  improved  over last  year's  levels as crude oil prices
continued  to rise  throughout  the third  quarter due to  worldwide  production
cutbacks and improving  demand.  Average realized crude oil prices for the third
quarter and nine  months of 1999 were  $16.96 and $13.36 per barrel,  53 percent
and 16 percent  above the 1998  periods.  For the third  quarter  and first nine
months of 1999,  average  natural gas prices were $1.35 and $1.36 per MCF,  nine
percent and 13 percent below last year.

Daily production in the third quarter and first nine months of 1999 was slightly
below last year's levels.  Third quarter  production  declines in the U.K. North
Sea due to temporary  operating  problems  early in the quarter and in Indonesia
due to lower  volumes  as a result of higher  prices  were  offset by  increased
production  in the  Partitioned  Neutral Zone as a result of increased  drilling
activity.  Year-to-date  production declines in the U.K. North Sea and lower gas
production  in  Latin  America  were  offset  by  increased  production  in  the
Partitioned Neutral Zone.

Expenses were lower for the third quarter of 1999 as a result of continued  cost
savings  from  the  restructuring  of  our  worldwide   upstream   organization.
Exploratory  expenses  for the third  quarter  of 1999 were $60  million  before
taxes,  $15 million  higher than last year.  Exploratory  expenses for the first
nine months of 1999 were $178 million before taxes, $49 million higher than last
year.

Looking Forward in the Worldwide Upstream

We intend to continue to cost-effectively explore for, develop and produce crude
oil  and  natural  gas  reserves.  In an  effort  to  boost  long-term  upstream
profitability,  we are planning to sell producing  properties that no longer fit
our business strategy.  Specifically,  we plan to sell selected producing assets
totaling about 100,000 barrels per day in the United States,  offshore  Trinidad
and in the North Sea. As a result,  we now anticipate that worldwide  production
will increase by one-to-two percent annually over the next three-to-five years.

Our growth areas of focus include the U.S. Gulf of Mexico,  Kazakhstan,  Brazil,
Venezuela  and West  Africa.  Earlier  this  year,  we  announced  two major oil
discoveries  offshore  Nigeria.  We recently signed an agreement to acquire a 45
percent  interest  in the  Malampaya  Deep  Water  Natural  Gas  Project  in the
Philippines.  Malampaya is on schedule to deliver  first gas by the end of 2001,
and is expected to achieve gas  production  rates of 360 million  cubic feet per
day by the year  2002.  We expect at  year-end  1999 this  project  will add 140
million  barrels of oil  equivalent to our proved  reserve base and increase our
international gas reserves by 30 percent.

Our expense reduction program is also showing success. We are well on our way to
capturing the expected $200 million in annual pre-tax cash expense  savings from
our worldwide upstream  restructuring  program announced in November,  1998. The
program is designed to place greater  emphasis on our long-term  production  and
reserve  growth,  and to address the need for  streamlining  costs and improving
competitiveness.  These  savings  include  lower  people-related  and  operating
expenses.



                                     - 11 -
<PAGE>

REFINING, MARKETING AND DISTRIBUTION

         United States

We conduct our U.S. downstream activities primarily through Equilon, our western
alliance with Shell Oil Company, and Motiva, our eastern alliance with Shell Oil
Company and Saudi Refining, Inc.

Our share of refining,  marketing and distribution  earnings in the U.S. for the
third  quarter of 1999 was $118  million,  as compared with $124 million for the
third quarter of 1998. For the first nine months of 1999 and 1998, earnings were
$204 million and $233 million.  Results for 1999 included second quarter special
charges of $76 million for the  write-down  of assets to their  estimated  sales
values  due to the  pending  sales by  Equilon  of its El Dorado  and Wood River
refineries  and $11  million  for  alliance  reorganization,  restructuring  and
employee  separation  costs.  Results  for 1999 also  included  a first  quarter
special benefit of $8 million due to higher  inventory values on March 31, 1999.
This follows a fourth-quarter 1998 charge of $34 million to reflect lower prices
on December 31, 1998 for inventories of crude oil and refined products. We value
inventories  at the lower of cost or market,  after  initial  recording at cost.
Inventory valuation  adjustments are reversed when the associated physical units
of inventory are sold. Excluding these special items, results for the first nine
months of 1999 were $283 million.

Results for the third quarter of 1998 included a net special gain of $25 million
for U.S. alliance  formation issues.  This included gains of $73 million for the
Federal Trade Commission-mandated sales of the Anacortes refinery and Plantation
pipeline.  Also  included  were  charges of $9  million  for  alliance  employee
separation costs and $39 million for asset  write-downs of closed facilities and
surplus equipment to their net realizable  values.  These facilities  included a
refinery in Texas,  research labs located in Texas and New York and a lube plant
in Virginia.  Results for 1998 also included a second quarter  special charge of
$32 million,  mainly for alliance  employee  separation  costs.  Excluding these
special items,  results for the third quarter and first nine months of 1998 were
$99 million and $240 million.

U.S.  refining,  marketing and  distribution  earnings before special items were
higher than last year for the third  quarter and nine months 1999.  During these
periods,  Equilon's earnings benefited from improved West Coast refining margins
and improved utilization at the Martinez refinery, although operational problems
at the Puget Sound refinery earlier this year had a negative impact on earnings.
Refining  margins on the West Coast  benefited  from industry  refinery  outages
which caused  market  supply  disruptions.  Marketing  margins were weak for the
quarter as gasoline pump prices lagged increases in spot prices.

Motiva's  earnings for the nine months were affected by weak refining margins on
the East and Gulf Coasts due to high  industry-wide  refined  product  inventory
levels.  These  effects were  mitigated  by higher  gasoline  sales  volumes and
improved refinery utilization in 1999.

The  third  quarter  and first  nine  months  of 1999  also  benefited  from the
realization  of synergies for Equilon and Motiva,  including  re-engineering  of
work processes,  leveraging  economies of scale to reduce supply costs,  sharing
best  practices  and  capitalizing  on  logistical  and  trading   opportunities
including higher utilization of proprietary pipelines and other assets.




<PAGE>

                                     - 12 -

         International

Refining,  marketing and  distribution  earnings  outside the U.S. for the third
quarter of 1999 were $6  million,  as  compared  with $38  million for the third
quarter of 1998. For the first nine months of 1999 and 1998,  earnings were $377
million and $414 million.  Results for each of the first three  quarters of 1999
included  special  benefits  of  $75  million,  $55  million  and  $14  million,
respectively,  to reflect higher prices for crude oil and refined products. This
follows a  fourth-quarter  1998 special  charge of $108 million to reflect lower
prices on December 31, 1998, as well as additional charges previously  recorded.
We value inventories at the lower of cost or market,  after initial recording at
cost. Inventory valuation  adjustments are reversed when the associated physical
units of inventory are sold. Results for the third quarter of 1999 also included
special  charges of $32 million for our 50 percent  share of Caltex' loss on the
sale of its equity  interest  in Koa Oil Co.  Ltd.  and $48  million for related
deferred currency translation amounts.  Additionally, our results for the second
quarter of 1999  included a Korean tax benefit of $54 million,  as well as a $25
million charge for our share of Caltex' restructuring charges and $9 million for
employee separation costs in Europe and Latin America. See the section entitled,
Reorganizations,  Restructurings  and Employee  Severance  Programs beginning on
page 15 of this Form 10-Q for additional  information.  Excluding  these special
items,  results  for the third  quarter  and first nine  months of 1999 were $72
million and $293 million.

Our results for 1998 included a third quarter net special  charge of $43 million
for a reorganization  program in Caltex. This charge results from their decision
to structure their  organization  along  functional lines and to reduce costs by
establishing a shared service center in the  Philippines.  In implementing  this
change,  Caltex relocated its headquarters  from Dallas to Singapore.  About $35
million of the charge  relates to severance  and other  retirement  benefits for
about 200 employees who have not relocated, write-downs of surplus furniture and
equipment and other costs.  The balance of the charge is for severance  costs in
other affected areas and amounts spent in relocating employees to the new shared
service center. Excluding this special charge, results for the third quarter and
first nine months of 1998 were $81 million and $457 million.

Lower international refining and marketing results in 1999 reflected the squeeze
on margins as escalating crude costs have outpaced product price increases. This
pressure on refining margins  impacted all major operating  areas.  Results were
also  adversely  impacted by depressed  marketing  margins and lower  volumes in
Brazil due to poor economic conditions and related currency devaluation.  In the
Caltex region,  results  benefited from reduced currency  volatility as economic
conditions  improved.  The third quarter also  included  gains from the sales of
marketable securities.

Looking Forward in the Worldwide Downstream

Our U.S. joint ventures with Shell and Saudi  Refining,  Inc. should continue to
achieve  lower  costs and capture  synergies.  We expect that our share of these
annual pre-tax cost reductions will be over $300 million, and we are well on our
way to capturing  these  savings.  These savings  include  lower  people-related
expenses and reductions in cash operating expenses due to efficiencies.  We have
already  captured  about $35 million in annual  pre-tax  cost  savings  from our
international downstream operations' announced restructuring, representing lower
people-related  expenses. In addition, we have already realized our share of the
previously-announced  $25 million of annual pre-tax cost savings from the Caltex
reorganization.  These savings represent lower people-related  expenses.  We now
anticipate  that we will  capture  by the end of  this  year an  additional  $10
million in annual  pre-tax cost savings from the Caltex  reorganization.  We are
also well on our way to capturing $25 million in annual pre-tax cost  reductions
from our  worldwide  Fuel and  Marine  Marketing  joint  venture  with  Chevron,
representing  our  share  of  reductions  in  cash  operating  expenses  due  to
efficiencies.




                                     - 13 -
<PAGE>

GLOBAL GAS AND POWER

During the third  quarter of 1999,  responsibility  for the global gas marketing
segment and our  cogeneration,  gasification,  hydrocarbons-to-liquids  and fuel
cell technology units was combined under a single senior executive, creating the
Global Gas and Power  segment.  Prior period  information  has been  restated to
reflect this change.

Global gas and power earnings for the third quarter of 1999 were $6 million,  as
compared with a loss of $8 million for the third  quarter of 1998.  Earnings for
the first nine months of 1999 were $13  million,  as compared  with a loss of $9
million for the  comparable  period of 1998.  Results for 1999 included a second
quarter  special  charge of $3 million for employee  separation  costs.  See the
section  entitled,   Reorganizations,   Restructurings  and  Employee  Severance
Programs  beginning  on page 15 of this  Form 10-Q for  additional  information.
Excluding  this special  charge,  results for the first nine months of 1999 were
$16  million.  Results for 1998  included a second  quarter  special gain of $20
million  from the sale of a  partial  interest  in a  pipeline.  Excluding  this
special  gain,  results  for the  first  nine  months of 1998 were a loss of $29
million.

Gas marketing  operating  results for the third quarter and first nine months of
1999  benefited from the continued  improvement of natural gas margins.  Results
for the  first  nine  months of 1999  reflected  gains on  normal  asset  sales,
including our interest in a U.K. retail gas marketing  operation and the sale of
a U.S. gas gathering pipeline, as well as lower operating expenses.

Operating  results for the power  related  activities  in the third  quarter and
first nine months of 1999  reflected  lower margins from  Indonesian  geothermal
activities,  due to  higher  costs  and lower  revenues  caused by the  currency
devaluation,  non-recurring  recoupment of  development  costs in 1998 and lower
gasification licensing revenues.

We have already captured the  previously-announced $20 million in annual pre-tax
cost savings from the global gas marketing  restructuring  announced in November
1998.  We now  anticipate  that we  will  capture  by the  end of  this  year an
additional  $10 million in annual  pre-tax cost savings.  These savings  include
lower  people-related  expenses and benefits from our exiting the United Kingdom
gas marketing business.

     OTHER BUSINESS UNITS

Results  for both the third  quarter of 1999 and 1998 were losses of $1 million.
Results for the first nine months of 1999 were a loss of $3 million, as compared
with a loss of $1 million  for the  comparable  period in 1998.  Other  business
units include our insurance activity.

     CORPORATE/NON-OPERATING

Corporate/Non-operating charges for the third quarter of 1999 were $129 million,
as compared with charges of $84 million for the third  quarter of 1998.  For the
first nine months of 1999 and 1998,  charges were $365 million and $288 million.
Results  for 1999  included a second  quarter  special  charge of $6 million for
employee   separation   costs.  See  the  section   entitled,   Reorganizations,
Restructurings and Employee Severance Programs beginning on page 15 of this Form
10-Q for additional information.  Excluding this special charge, charges for the
first nine months of 1999 were $359  million.  Results for 1998 included a third
quarter  special  benefit of $25 million to adjust for prior years'  federal tax
liabilities and a second quarter special tax benefit of $19 million attributable
to the sale of an interest  in a  subsidiary.  Excluding  these  special  gains,
charges for the third  quarter  and first nine months of 1998 were $109  million
and $332 million.

Corporate/Non-operating  results for the third  quarter and first nine months of
1999 reflected higher interest expense from increases in interest rates and debt
levels. Additionally, third quarter 1998 results included gains from the sale of
securities by a subsidiary.



                                     - 14 -
<PAGE>

We are well on our way to capturing  the expected $60 million in annual  pre-tax
cost  savings  as  a  result  of  the  fourth  quarter  1998  corporate   center
reorganization  and  other  cost-cutting  initiatives,  mainly  lower  operating
expenses and people-related expenses.



LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

Our cash,  cash  equivalents  and  short-term  investments  were $219 million at
September 30, 1999, as compared with $271 million at year-end 1998.

During 1999, our operations  provided cash of $1,887  million.  We also had cash
inflows of $306  million  from asset  sales and $279  million  from net sales of
investment instruments. Early collection of a note receivable from our affiliate
Equilon  provided  another $101 million.  We spent $1,729 million on our capital
and exploratory program and paid $776 million in common,  preferred and minority
interest dividends.

At September  30, 1999,  our ratio of total debt to total  borrowed and invested
capital was 36.5%,  as compared  with 36.8% at year-end  1998.  At September 30,
1999,  our  long-term  debt included  $2.05 billion of debt  scheduled to mature
within one year,  which we have both the intent and  ability to  refinance  on a
long-term basis. During the first nine months of 1999, we reduced our commercial
paper by $1,158 million, to $458 million at September 30, 1999. We issued $1,268
million under our  medium-term  note program and borrowed $400 million due 2009.
In addition, we reduced other debt obligations by $582 million. During the first
nine months of 1999,  we entered into $850 million of floating rate pay interest
rate swaps.  All  floating  rate swaps  entered  into during 1999 are indexed to
LIBOR.  We maintain  $2.05 billion in revolving  credit  facilities,  which were
unused at September  30, 1999, to provide  additional  support for liquidity and
our commercial paper program.

During the third quarter of 1999, we established a new "shelf"  registration for
$1.5 billion of combined debt and equity securities, bringing our total capacity
under this program to $1.975 billion.

We  consider  our  financial  position  to be  sufficiently  strong  to meet our
anticipated future financial requirements.





REORGANIZATIONS, RESTRUCTURINGS AND EMPLOYEE SEVERANCE PROGRAMS
---------------------------------------------------------------

In the fourth quarter of 1998, we announced that we were reorganizing several of
our operations and implementing  other cost-cutting  initiatives.  The principal
units  affected  were  our  worldwide  upstream  operations;  our  international
downstream  operations,  principally  our  marketing  operations  in the  United
Kingdom  and  Brazil  and our  refining  operations  in  Panama;  our global gas
marketing operations, now included as part of our global gas and power operating
segment;  and our  corporate  center.  The  reorganizations  were  substantially
completed by the end of the first  quarter of 1999. We accrued $115 million ($80
million,  net of tax) for employee  separations,  curtailment  costs and special
termination  benefits  associated  with these  announced  restructurings  in the
fourth  quarter of 1998.  During the second  quarter of 1999,  we  expanded  the
employee severance programs and recorded an additional  provision of $48 million
($31 million,  net of tax). For the most part,  severance  accruals are shown as
operating expenses in the Statement of Consolidated Income.

The table on the following page, which identifies each of our four restructuring
initiatives,  provides the provision  recorded in the fourth quarter of 1998 and
the additional  provision recorded in the second quarter of 1999, along with the
payments made through  September 30, 1999 and the  remaining  obligations  as of
September 30, 1999. We will pay the remaining  obligations  in future periods in
accordance with plan provisions.



                                     - 15 -

<PAGE>

<TABLE>
<CAPTION>
                                              Provision Recorded in the
                                              -------------------------             Payments                Remaining
                                      Fourth Quarter,     Second Quarter,         Made Through          Obligations as of
                                             1998            1999              September 30, 1999      September 30, 1999
                                      ---------------     ---------------      ------------------      ------------------
                                                                        (Millions of dollars)

<S>                                           <C>             <C>                    <C>                   <C>
       Worldwide upstream                     $ 56            $20                    $(50)                 $26
       International downstream                 25             13                     (22)                  16
       Global gas and power                      5              4                      (5)                   4
       Corporate center                         29             11                     (19)                  21
                                              ----            ---                    ----                  ---
            Total                             $115            $48                    $(96)                 $67
                                              ====            ===                    ====                  ===


At the time we initially announced these programs,  we estimated that over 1,400
employee  reductions would result.  Employee  reductions of 800 in our worldwide
upstream  operations,  300 in our  international  downstream  areas,  100 in our
global gas and power  operations and 200 in our corporate  center were expected.
During the second  quarter of 1999,  we  expanded  the  program by almost  1,100
employees,  comprised of 600 employees in our worldwide upstream operations, 250
employees in our international downstream areas, 100 employees in our global gas
and  power  operations  and  150  employees  in our  corporate  center.  Through
September 30, 1999,  employee reductions totaled 1,334 in our worldwide upstream
operations, 426 in our international downstream areas, 163 in our global gas and
power  operations and 398 in our corporate  center.  Almost all of the remaining
reductions,  representing about 6% of the total reductions,  will occur prior to
the end of this year.


CAPITAL AND EXPLORATORY EXPENDITURES
------------------------------------

Capital and  exploratory  expenditures  were  $2,176  million for the first nine
months of 1999, compared with $2,769 million for the same period in 1998.

In  our  U.S.  upstream,   expenditures  for  developmental  activities  dropped
significantly and platform construction activity slowed in the deepwater Gulf of
Mexico.  Spending  increased  for enhanced oil recovery  projects in  California
which continues to be an area of focus. Internationally,  spending rose slightly
as compared to the prior year as  development  work  continued  on the Captain B
project in the U.K.  North Sea. Also,  1999 levels  reflect higher  spending for
lease  acquisitions  offshore Nigeria and increased  ownership in the Venezuelan
Hamaca project.  Project  completions during 1998 in other U.K. North Sea fields
led to comparatively lower spending in 1999.

In our  downstream,  spending  declines  reflected the  completion  last year of
refinery upgrade  projects in the United States and abroad.  Also, poor economic
conditions in  international  areas and globally  depressed  downstream  returns
resulted in deferrals of selected refinery and marketing expansion projects.

Global gas and power continues to invest in cogeneration  projects in California
and in Indonesia,  while spending on natural gas  transportation  is down due to
pipeline completions last year.

NEW ACCOUNTING STANDARDS
------------------------

In June 1998, the Financial  Accounting  Standards Board (FASB) issued Statement
of  Financial  Accounting  Standards  (SFAS)  133,  "Accounting  for  Derivative
Instruments and Hedging  Activities."  SFAS 133 establishes new accounting rules
and  disclosure   requirements   for  most  derivative   instruments  and  hedge
transactions.  In July  1999,  the FASB  issued  SFAS 137,  which  deferred  the
effective date of SFAS 133. We will adopt SFAS 133 effective January 1, 2001 and
are currently assessing the initial effects of adoption.





                                     - 16 -
<PAGE>

EURO CONVERSION
---------------

On  January  1,  1999,  11 of the 15  member  countries  of the  European  Union
established  fixed conversion rates between their existing legacy currencies and
one  common  currency--the  euro.  The euro  began  trading  on  world  currency
exchanges  and may be used in  business  transactions.  On January 1, 2002,  new
euro-denominated  bills and coins will be issued,  and legacy currencies will be
completely withdrawn from circulation by June 30 of that year.

Prior to  introduction of the euro, our operating  subsidiaries  affected by the
euro conversion  completed  computer  systems  upgrades and fiscal and legal due
diligence to ensure our euro  readiness.  Computer  systems have been adapted to
ensure that all our operating  subsidiaries  have the  capability to comply with
necessary business  requirements and  customer/supplier  preferences.  Legal due
diligence was conducted to ensure post-euro continuity of contracts,  and fiscal
reviews were completed to ensure  compatibility with our banking  relationships.
We, therefore, experienced no major impact to our current business operations.

We continue to review our marketing and  operational  policies and procedures to
ensure our  ability to  continue  to  successfully  conduct  all  aspects of our
business  in this  new,  price-transparent  market.  We  believe  that  the euro
conversion will not have a material adverse impact on our financial condition or
results of operations.


YEAR 2000
---------

On  pages  39 and 40 of our  1998  Annual  Report,  we  discussed  our  state of
readiness and our costs,  risks and contingency plans for dealing with potential
Year 2000 (Y2K) date change problems.  We reported that approximately 95% of the
computers and computer  software involved in corporate  financial  applications,
and about 5% of our industrial automation systems used in refineries,  lubricant
and gas plants and oil well operations  needed  modification  or upgrade.  Since
that time, we have not identified any additional material Y2K risks. We continue
to believe that the worst case  scenario we described in our 1998 Annual  Report
is not likely to occur. However, if it occurs, Y2K failures, if not corrected on
a timely basis or otherwise  mitigated by our  contingency  plans,  could have a
material  adverse  effect on our results of  operations,  liquidity  and overall
financial condition.

We identified over 45,000 systems for assessment of potential Y2K issues.  These
were  categorized  as:  Applications,  Telecommunications,  Computer  Systems or
Embedded  Systems   (Industrial   Automation).   We  assessed  each  system  and
prioritized them as Critical, Essential or Important. Critical systems are those
related to safety,  health and environment,  including monitoring and regulatory
reporting systems.  Essential systems are those required to accomplish  business
objectives.  Important  systems  are those  used in a  support  role and are not
required for day-to-day operations.

As of the end of the third quarter of 1999, we completed  modifying or upgrading
all of our Critical and  Essential  systems that  required  such work,  with the
exception of one Essential  system.  In October,  we successfully  implemented a
workaround for this one system.

We completed  our review of our critical  suppliers  and customers and developed
contingency  plans.  If we were not satisfied that these critical  suppliers and
customers  will be able to operate  in 2000,  we have  established  alternatives
and/or developed contingency plans.

As part of our contingency  planning,  we have completed evaluating the business
resumption  plans of all our  business  units  for any Y2K  issues,  and we have
completed  end-of-year  rollover plans.  During the fourth  quarter,  we will be
coordinating  tests of our Early Alert System,  which we will use for monitoring
the Y2K status of our key  facilities  around the world.  We will be testing our
procedures to manage both the  information  flows and our responses to different
situations.




                                     - 17 -
<PAGE>

During the third  quarter of 1999,  we spent $6 million in readying  our systems
for Y2K, bringing our total spent through September 30, 1999 to $55 million.  We
estimate that we will spend an additional $10 million on Y2K-related activities.
The majority of these  future  expenditures  will be incurred  during the fourth
quarter, with some expenditures in 2000.


FORWARD-LOOKING STATEMENTS
--------------------------

Portions of the foregoing discussion of RESULTS OF OPERATIONS;  REORGANIZATIONS,
RESTRUCTURINGS AND EMPLOYEE SEVERANCE PROGRAMS; EURO CONVERSION;  and, YEAR 2000
contain  "forward-looking  statements"  within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the  Securities  Exchange Act of 1934.
These  statements  are  based  on  our  current   expectations,   estimates  and
projections.  Therefore,  they could ultimately prove to be inaccurate.  Factors
which could affect our expectations for worldwide crude oil production, upstream
earnings and downstream margins in 1999 are changes in business conditions, such
as energy prices, world economic conditions, demand growth and inventory levels.
The  extent  and  timing of our  anticipated  cost  savings  and  reorganization
programs will depend upon worldwide and industry  economic  conditions.  Factors
that could alter the financial impact of our euro conversion include: changes in
current  governmental  regulations  and  interpretations  of  such  regulations;
unanticipated  implementation  costs;  and the effect of the euro  conversion on
product  prices and  margins.  Factors  that could affect our ability to be Year
2000  compliant  by the end of  1999  include:  the  failure  of our  customers,
suppliers,  governmental  entities  and  others to  achieve  compliance  and the
inaccuracy of  certifications  received from them; our inability to identify and
remediate  every  possible  problem;  and a shortage of  necessary  programmers,
hardware and software. For a further discussion of additional factors that could
cause  actual  results to  materially  differ from those in the  forward-looking
statements, please refer to the section entitled "Forward-Looking Statements and
Factors That May Affect Our Business" in our 1998 Annual Report on Form 10-K.


                           PART II - OTHER INFORMATION
Item 1. Legal Proceedings
-------------------------

     We have provided information about legal proceedings pending against Texaco
in Note 4 to the Consolidated  Financial Statements of this Form 10-Q, in Item 1
of our  first and  second  quarter,  1999  Form  10-Qs and in Item 3 of our 1998
Annual  Report on Form 10-K.  Note 4 of this Form 10-Q,  Item 1 of our first and
second quarter 1999 Form 10-Qs and Item 3 of our 1998 Form 10-K are incorporated
here by reference.

     The  Securities  and  Exchange  Commission  ("SEC")  requires  us to report
proceedings  that were instituted or  contemplated  by governmental  authorities
against  us  under  laws  or  regulations  relating  to  the  protection  of the
environment.  None of these proceedings is material to our business or financial
condition.  Following is a brief  description  of notices of  violation  that we
received and settled during the third quarter of 1999.

o    In August  1999,  California's  San Joaquin  Valley  Unified Air  Pollution
     Control  District  ("SJVUAPCD")  issued 13 notices of  violation  to Texaco
     California  Inc.  related to storage of organic  material in tanks having a
     true vapor pressure in excess of 1.5 psia without vapor control. The agency
     has not made a penalty demand, but it is possible that the agency will seek
     penalties in excess of $100,000.

o    On  August 30, 1999, Texaco  Exploration  and  Production  Inc. and  Texaco
     California  Inc.  settled  a  series  of  notices of violation filed by the
     SJVUAPCD  in  1997-1999.   The  notices  alleged  improper  permitting  and
     inadequate maintenance at facilities in  California.  Under the settlement,
     we paid a fine of $500,000, retired some emission  reduction  credits,  and
     agreed  to  install  vapor control  equipment  and  implement  an  enhanced
     environmental management plan.




                                     - 18 -
<PAGE>

Item 5. Other Information
-------------------------


</TABLE>
<TABLE>
<CAPTION>
                                                                         For the nine months          For the three months
                                                                         ended September 30,           ended September 30,
                                                                         -------------------           -------------------
                                                                          1999          1998           1999          1998
                                                                          ----          ----           ----          ----
                                                                                        (Millions of dollars)
                                                                                             (Unaudited)


<S>                                                                     <C>            <C>            <C>           <C>
CAPITAL AND EXPLORATORY EXPENDITURES
------------------------------------
   Exploration and production
         United States                                                  $  623         $1,142         $ 162         $ 328
         International                                                     865            812           304           276
                                                                        ------         ------         -----         ------
           Total                                                         1,488          1,954           466           604
                                                                        ------         ------         -----         ------
   Refining, marketing and distribution
         United States                                                     243            298            85           116
         International                                                     294            355           118           127
                                                                        ------         ------         -----         ------
           Total                                                           537            653           203           243
                                                                        ------         ------         -----         ------

   Global gas and power                                                    129            141            43            39
                                                                        ------         ------         -----         ------
         Total operating segments                                        2,154          2,748           712           886
   Other business units                                                     22             21             6             2
                                                                        ------         ------         -----         ------
           Total                                                        $2,176         $2,769         $ 718         $ 888
                                                                        ======         ======         =====         =====

   Exploratory expenses included above
         United States                                                  $  104         $  195         $  12         $   48
         International                                                     178            129            60             45
                                                                        ------         ------         -----         ------
           Total                                                        $  282         $  324         $  72         $   93
                                                                        ======         ======         =====         ======

</TABLE>





                                     - 19 -
<PAGE>

<TABLE>
<CAPTION>

                                                                         For the nine months          For the three months
                                                                         ended September 30,           ended September 30,
                                                                         -------------------           -------------------
                                                                         1999            1998         1999            1998
                                                                         ----            ----         ----            ----
                                                                                             (Unaudited)

<S>                                                                     <C>            <C>           <C>            <C>
OPERATING DATA
--------------
Exploration and Production
--------------------------

United States
-------------
     Net production of crude oil and natural
         gas liquids (000 BPD)                                             400            443           395            432
     Net production of natural gas - available
         for sale (000 MCFPD)                                            1,460          1,694         1,416          1,641
                                                                        ------         ------        ------         ------

         Total net production (000 BOEPD)                                  643            726           631            706

     Natural  gas sales (000 MCFPD)                                      3,284          3,926         3,263          3,963

     Average U.S. crude (per bbl)                                       $12.81         $10.87        $16.65         $10.06
     Average U.S. natural gas (per mcf)                                 $ 2.09         $ 2.03        $ 2.44         $ 1.89
     Average WTI (Spot) (per bbl)                                       $17.58         $14.89        $21.71         $14.16
     Average Kern (Spot) (per bbl)                                      $11.49         $ 8.43        $15.38         $ 8.65

International
-------------
     Net production of crude oil and natural
         gas liquids (000 BPD)
         Europe                                                            142            157           152            163
         Indonesia                                                         156            159           141            168
         Partitioned Neutral Zone                                          122            106           127            104
         Other                                                              65             66            60             59
                                                                        ------         ------        ------         ------
              Total                                                        485            488           480            494
     Net production of natural gas - available
         for sale (000 MCFPD)
         Europe                                                            261            255           252            261
         Colombia                                                          158            185           161            165
         Other                                                             105            108            91             87
                                                                        ------         ------        ------         ------
              Total                                                        524            548           504            513
                                                                        ------         ------        ------         ------

         Total net production (000 BOEPD)                                  573            579           564            580

     Natural gas sales (000 MCFPD)                                         551            692           539            633

     Average International crude (per bbl)                              $13.36         $11.55        $16.96         $11.05
     Average International natural gas (per mcf)                        $ 1.36         $ 1.57        $ 1.35         $ 1.49
     Average U.K. natural gas (per mcf)                                 $ 2.37         $ 2.53        $ 2.34         $ 2.34
     Average Colombia natural gas (per mcf)                             $ 0.64         $ 0.88        $ 0.67         $ 0.79

Worldwide
---------
     Total worldwide net production (000 BOEPD)                          1,216          1,305         1,195          1,286

</TABLE>





                                     - 20 -

<PAGE>

<TABLE>
<CAPTION>
                                                                         For the nine months          For the three months
                                                                         ended September 30,           ended September 30,
                                                                         -------------------           -------------------
                                                                         1999           1998          1999            1998
                                                                         ----           ----          ----            ----
                                                                                            (Unaudited)

<S>                                                                      <C>            <C>           <C>            <C>
OPERATING DATA
--------------

Refining, marketing and distribution
------------------------------------

United States
-------------
     Refinery input (000 BPD)
         Equilon area                                                      376            388           390            410
         Motiva area                                                       307            316           307            301
                                                                         -----          -----         -----          -----
              Total                                                        683            704           697            711

     Refined product sales (000 BPD)
         Equilon area                                                      697            579           752            616
         Motiva area                                                       376            366           371            421
         Other                                                             296            228           290            216
                                                                         -----          -----         -----          -----
              Total                                                      1,369          1,173         1,413          1,253


International
-------------
     Refinery input (000 BPD)
         Europe                                                            356            356           331            326
         Caltex area                                                       411            417           381            397
         Latin America/West Africa                                          71             64            68             66
                                                                         -----          -----         -----          -----
               Total                                                       838            837           780            789

     Refined product sales (000 BPD)
         Europe                                                            609            567           585            547
         Caltex area                                                       663            580           654            563
         Latin America/West Africa                                         485            455           479            474
         Other                                                              90             53            86             56
                                                                         -----          -----         -----          -----
               Total                                                     1,847          1,655         1,804          1,640

</TABLE>






                                     - 21 -

<PAGE>

Item 6. Exhibits and Reports on Form 8-K
----------------------------------------

(a)  Exhibits

     --     11)  Computation of Earnings Per Share of Common Stock.

     --    (12)  Computation of Ratio of Earnings to Fixed Charges  of Texaco on
                 a Total Enterprise Basis.

     --    (20)  Copy  of  Texaco  Inc.'s  Annual  Report  on  Form 10-K for the
                 fiscal  year ended  December  31, 1998  (including  portions of
                 Texaco Inc.'s Annual Report to Stockholders  for the year 1998)
                 and a copy of Texaco Inc.'s Quarterly  Reports on Form 10-Q for
                 the  quarterly  periods ended March 31, 1999 and June 30, 1999,
                 as previously  filed by the Registrant  with the Securities and
                 Exchange Commission, File No. 1-27.

     --    (27)  Financial Data Schedule.

(b) Reports on Form 8-K:

     During the third quarter of 1999, the Registrant  filed Current  Reports on
Form 8-K for the following events:

     1.   July 26, 1999

          Item 5. Other Events -- reported that Texaco issued an Earnings  Press
          Release for the second quarter 1999.

     2.   August 3, 1999

          Item 5.  Other  Events  --  provided  a  description  of an  Officers'
          Certificate  dated August 3, 1999  executed by Texaco  Capital Inc., a
          wholly-owned subsidiary of the Registrant, which established the terms
          and  provisions of a series of securities  designated  "Second  Series
          1999 Medium-Term Notes," for up to $2 billion.

     3.   September 27, 1999

          Item 5.  Other Events -- reported  that  Texaco's 50%-owned affiliate,
          Caltex Corporation, sold  97.2%  of its 50% equity interest in Koa Oil
          Co. Ltd. to  Nippon  Mitsubishi  Oil  Corporation in response to their
          public tender offer.







                                     - 22 -
<PAGE>

                                   SIGNATURES
                                   ----------



     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned, thereunto duly authorized.




                                                                  Texaco Inc.
                                                           ---------------------
                                                                 (Registrant)




                                                    By:         G.J. Batavick
                                                           ---------------------
                                                                (Comptroller)




                                                    By:           R.E. Koch
                                                           ---------------------
                                                           (Assistant Secretary)




Date:    November 12, 1999
         -----------------








                                     - 23 -